In February 2000, the Canadian Taxpayer Federation's three-year campaign
to end bracket creep -- the non-indexation of tax brackets -- was completed
with the restoration of full-indexation announced in the federal budget.
It meant, and still does, that Canadians saved some $20.7 billion on their
federal income taxes that they otherwise would have paid between 2000 and
2004.

This campaign represented the ideal combination of good fiscal policy and
great social policy. Ending bracket creep benefited all Canadian taxpayers
but there was no doubt it was particularly help for lower and middle-income
earners as well as those on fixed incomes.

The next bracket creep-like opportunity is now upon us: it's time to dramatically
raise both the basic personal exemption -- hereafter called the BPE -- (presently
at $7,756) and spousal exemption (presently at $6,586) to $15,000 by 2008.

Why $15,000 you may ask? Simply stated, $15,000 is roughly the average amount
earned (before taxes) by a minimum wage employee. Why do we tax these people
who are just entering the workforce, considered working poor, or students
just looking to earn a few extra bucks to make ends meet? The importance
of this question becomes self-evident when one considers that we recycle
a good deal of the taxes paid by minimum wage workers back to them in the
form of GST credits and other tax benefit schemes. It truly is a make work
project for tax collectors in Ottawa.

Here's a novel idea. Why not simply raise the BPE and leave more -- if not
all -- of this money on their paycheques in the first place so low-wage earners
can have the dignity of better providing for their families on a daily, weekly
and monthly basis?

Indeed, this issue was raised in the CTF 2003 pre-budget submission before
the House of Commons Finance Committee during its pre-budget hearings last
November.

Over 83 per cent of Canadian tax filers (all 22 million of us) make $50,000
or less. And a 97 per cent of Canadians make less than $100,000. It bears
repeating that raising the BPE is a tax cut for all Canadians.

CTF calculations peg the maximum cost of raising the BPE to $8,000 at $602
million and if the spousal exemption (currently at $6,586) is also hiked
to $8,000, the total impact would equate to $1.3 billion. A move to hike
the BPE to $10,000 would cost $5.5 billion and combined with an equivalent
increase in the spousal exemption would result in a $7.2 billion impact --
removing almost 588,000 Canadians from the tax rolls.

Getting to the target BPE amount of $15,000 would represent a $17.8 billion
maximum impact on the public treasury or a $22 billion hit (read: tax cut)
if the spousal exemption is increased to $15,000 over the same period as
well. This would permanently remove over 2.1 million Canadians from the tax
rolls.

Spread over five years, it would be relatively easy to allocate $4.4 billion
annually to bump the BPE to $15,000. And Ottawa has the capacity to do this
as John Manley's last budget predicted $70 billion in over-taxation surpluses
through to 2007.

From a fiscal perspective this is wholly affordable. From a social justice
perspective, providing tax relief for all Canadians but most specifically
lower-income Canadians is very compelling.

The Bush tax cut proposals from January 2003 ensure that an American family
of four earning $40,000 or less will pay no federal income tax. Today, a
similar Canadian family starts to pay taxes at $27,000. Raising our basic
personal and spousal exemption is really not a question of choice, it's an
absolute necessity. It should be Paul Martin's first budget priority in 2004.
After all, it is a tax cut for all Canadians.